Today I put a coat of satin finish polyacrylic over the painted door and woodwork. I like the effect better than the matte finish. Filled in the gaps for fireplace and shelf holes by gluing together two sheets of chipboard, then glued a piece of paper over the patch to seal. This is the back of the hole where the shelves were. They gray areas in the second photo are the paper patches.
I removed the extra bit of spacing on the right side, so the wall is flat agains the outside of the box. I used an extra piece of illustration board to alter the size of various sections to fit the new spaces. It is a really nice sized room now. The piece lying on the floor is my test piece. Will let the glue dry overnight, then put on another coat of gesso to cover the paper patches. Will adhere some muslin to it using liquid starch when the gesso dries and see how that goes.
I am reluctant to glue the walls in place just yet. I don't think I want any wall sconces or wall plugs, but if I change my mind, will be hard to add after gluing walls.
Am considering a working ceiling fan since this is a 12-foot ceiling, but other than a work light at the work table on the upper level and lights behind windows, not sure where else to put fixtures. May put LEDs on ceiling at the front of the box to give general illumination. They would be hidden by the framing. Might also consider a cornice above front edge of elevated portion to hide a few more LEDs to get light into the back. The same place that sells the working fans offers remote control devices that enable controlling lights individually. I'm thinking about it.